An Interesting Twist For Appraisal Clauses

Here is an opinion from the Texas Supreme Court that was issued in April 2020.  This opinion deals with how an appraisal clause is handled when the appraisal clause is unilateral.  The style of the case is Steven Biasatti and Paul Gross D/B/A TopDog Properties v. GuideOne National Insurance Company.

The issue in this case is whether an insurer’s payment of an appraisal award, the award of which was obtained under a unilateral appraisal clause, bars an insured’s claim under the Texas Prompt Payment of Claims Act (TPPCA).

In June 2013, TopDog who was insured by GuideOne, sustained wind and hail damage to its property.  After a first inspection, GuideOne determined the damage fell below the $5,000 deductible and refused to pay.  A second inspection resulted in the same outcome.  TopDog sought to invoke the policy appraisal process and GuideOne refused based on the appraisal clause only allowing GuideOne to invoke the appraisal.

TopDog sued alleging breach of contract, bad faith, and TPPCA violations.  Over eight months later, GuideOne demanded an appraisal, TopDog declined and GuideOne eventually obtained an Order from the Court for the appraisal.  through appraisal, the loss was set at %168,808.  In October 2013, GuideOne paid TopDog the appraisal and both parties filed for summary judgment.  The trial court granted the motion for GuideOne and denied TopDog’s motion.  The appeals court affirmed.

TopDog then appealed to this Supreme Court.

TopDog argued that its claims for breach of contract and bad faith should create a exception to the independent inury rule where the insurer relies on a unilateral appraisal clause to force the insured to file suit, compels appraisal, and then pays the appraisal award.  In that situation, TopDog asserts the appraisal award itself constitutes actual damages.

This Supreme Court reversed the trial court and remanded the case back to the trial court for judgment in light of recent Supreme Court decisions in Barbara Technologies Corp. v. State Farm Lloyds and Ortiz v. State Farm Lloyds.  These cases need to be read.

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